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Article: Delivery Risk and the Hedging Role of Options

TitleDelivery Risk and the Hedging Role of Options
Authors
Lien, DWong, KP
Issue Date2002
PublisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/
Citation
Journal Of Futures Markets, 2002, v. 22 n. 4, p. 339-354 How to Cite?
DOI: http://dx.doi.org/10.1002/fut.10011
AbstractMultiple delivery specifications exist on nearly all commodity futures contracts. Sellers typically are allowed to deliver any of several grades of the underlying commodity and at any of several locations. On the delivery day, the futures price as such needs not converge to the spot price of the par-delivery grade at the par-delivery location, thereby imposing an additional delivery risk on hedgers. This article derives the optimal hedging strategy for a risk-averse hedger in the presence of delivery risk. In particular, it is shown that the hedger optimally uses options on futures for hedging purposes. This article provides a rationale for the hedging role of options when futures markets allow for multiple delivery specifications. © 2002 Wiley Periodicals, Inc.
Persistent Identifierhttp://hdl.handle.net/10722/85553
ISSN
0270-7314
2023 Impact Factor: 1.8
2023 SCImago Journal Rankings: 0.672
ISI Accession Number ID
WOS:000173809400003
References
References in Scopus

 

DC FieldValueLanguage
dc.contributor.authorLien, Den_HK
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:06:30Z-
dc.date.available2010-09-06T09:06:30Z-
dc.date.issued2002en_HK
dc.identifier.citationJournal Of Futures Markets, 2002, v. 22 n. 4, p. 339-354en_HK
dc.identifier.issn0270-7314en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85553-
dc.description.abstractMultiple delivery specifications exist on nearly all commodity futures contracts. Sellers typically are allowed to deliver any of several grades of the underlying commodity and at any of several locations. On the delivery day, the futures price as such needs not converge to the spot price of the par-delivery grade at the par-delivery location, thereby imposing an additional delivery risk on hedgers. This article derives the optimal hedging strategy for a risk-averse hedger in the presence of delivery risk. In particular, it is shown that the hedger optimally uses options on futures for hedging purposes. This article provides a rationale for the hedging role of options when futures markets allow for multiple delivery specifications. © 2002 Wiley Periodicals, Inc.en_HK
dc.languageengen_HK
dc.publisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/en_HK
dc.relation.ispartofJournal of Futures Marketsen_HK
dc.rightsThe Journal of Futures Markets. Copyright © John Wiley & Sons, Inc.en_HK
dc.titleDelivery Risk and the Hedging Role of Optionsen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0270-7314&volume=22&spage=339&epage=354&date=2002&atitle=Delivery+Risk+and+the+Hedging+Role+of+Optionsen_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1002/fut.10011en_HK
dc.identifier.scopuseid_2-s2.0-0036110231en_HK
dc.identifier.hkuros71444en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0036110231&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume22en_HK
dc.identifier.issue4en_HK
dc.identifier.spage339en_HK
dc.identifier.epage354en_HK
dc.identifier.isiWOS:000173809400003-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridLien, D=7006094582en_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK
dc.identifier.issnl0270-7314-

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